CIRCULAR

GUIDING THE ACCOUTING OF VALUE - ADDED TAX APPLICABLE TO THE VIETNAM ELECTRICITY CORPORATION

Pursuant to Law on Value- Added Tax No.02/1997/QH9 of May 10, 1997;
Pursuant to Circular No.89/1998/TT-BTC of June 27,1998, Circular No. 100/1998/TT/BTC of July 15, 1998 and Circular No. 146/1998/TT-BTC of November 12, 1998 of the Ministry of Finance guiding the calculation and declaration for payment of value-added tax by the power industry;
In order to make the accounting of value-added tax ( hereafter referred to VAT for short) compatible with the VAT calculation, declaration and payment by the Vietnam Electricity Corporation, the Ministry of Finance guides the accounting of VAT on electricity produced by the Vietnam Electricity Corporation, as follows:

I. GENERAL PROVISIONS:

The Vietnam Electricity Corporation shall gave to organize the VAT accounting according to the regulations of the current accounting regime and this Circular's provisions.

- The electricity sale turnover shall be reflected into Account 511 or Account 512 according the non-VAT selling prices; the fines for violations in the electricity consumption,... (if any) and surcharges collected according to the prescribed regime (if any) which have been used for investment in upgrading electricity grids shall not be reflected into Account 511 or Account 512.

- The value of materials , goods, fixed assets and/or services purchased for use in the electricity production and other business activities shall be reflected according to the purchasing prices without VAT (in cases where the VAT invoices or particular vouchers are available)

The value of materials, goods, fixed assets and/or services purchased without VAT invoices shall be reflected according to the payment prices, and the input VAT shall not be deducted.

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The Corporation shall have to sum-up the lists of deductible input VAT of the dependent - accounting units and deductible input VAT arising at the Corporation Office in order to make the sum-up list and calculate the deductible input VAT amount.

The deductible input VAT amounts arising in the electric power plants, electricity transmission companies, the national electricity network control centers,... and other dependent-accounting units of the Corporation shall be deducted not at such units, but at the Vietnam Electricity Corporation.

- The deductible input VAT amounts arising at the offices of Electricity companies I, II, and III shall not be deducted at such offices but shall be assigned for deduction at the provincial/municipal electricity offices under such companies. The levels and criteria for allocation of input VAT to the provincial/municipal electricity offices shall ply with the provisions of Point 2.2, Section II of Circular No.146/1998/TT-BTC of November 12, 1998 of the Ministry of Finance.

II. VAT ACCOUNTING

1. Accounting at the Corporation

-Monthly, basing themselves on the reports on production and/ or business costs arising in the power plants, electricity transmission companies, the national electricity network control centers, project management boards attached to the Corporation and other dependent-accounting units thereof, the Corporation's accountants shall write:

Debit: Account 154 - Costs of unfinished production and/ or business activities (1541)

Debit: Account 642 - Enterprise management expenses

Credit: Account 336 - Internally payable amounts

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Debit: Account 133 - Deductible VAT

Credit: Account 336 - Internally payable amounts.

Basing themselves on the invoices of electricity sale to the electricity companies, the accountants shall reflect the electricity sale turnover according to the selling prices without, writing:

Debit: Account 136 - Internally collectible amounts (Total payment prices)

Credit: Account 3331 - Payable VAT

Credit: Account 512 - Internal sale turnover (Selling prices without VAT).

- At the end of each accounting period, the accountants shall calculate and determine the input VAT amount deducted in the period, writing:

Debit: Account 3331 - Payable VAT

Credit: Account 133 - Deductible VAT.

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Debit: Account 336 - Internally payable amounts

Credit: Accounts 111, 112,...

- Other VAT accounting contents shall comply with the current accounting regime.

2. The VAT accounting in the power plants, electricity transmission companies, the national electricity network control centers, project management boards attached to the Corporation and the dependent-accounting units thereof (hereafter referred to as the dependent-accounting units).

-When purchasing materials, goods, fixed assets and/or services for use in power generation and/or trading with VAT invoices, the accountants shall reflect the value of such materials, goods, fixed assets and/or services according to the purchasing prices without VAT, writing:

Debit: Accounts 152, 153, 211, 627, 642...(According to the purchasing prices without VAT)

Debit: Account 133 - Deductible VAT

Credit: Accounts 111, 112, 331... (Total payment prices).

- Monthly, the dependent-accounting units of the Corporation shall base themselves on the purchase invoices and vouchers to made lists of invoices and vouchers for goods and services purchased for use in the power generation under the prescribed regime to serve as basis for determining the input VAT to be deducted at the Corporation. Basing themselves on figures on such lists, the accountants shall reflect and transfer the deductible input VAT amounts which have not been deducted at the dependent-accounting units but deducted at the Corporation, writing:

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Debit: Account 133 - Deductible VAT

- The accounting of VAT for business activities other than electricity generation shall ply with the current accounting regime.

3. VAT accounting at Hanoi Electricity Company and Ho Chi Minh City Electricity company

- Basing themselves on the invoices for purchase of electricity from the Corporation, the accountants shall reflect the electricity production costs according to the purchasing prices without VAT, writing:

Debit: Account 154 - Costs of unfinished production and/ or business activities (according to the purchasing prices without VAT)

Debit: Account 133 - Deductible VAT

Credit: Account 336 - Internally payable amounts (Total payment prices).

- Basing themselves on the electricity sale invoices, the accountants shall reflect the electricity sale turnover according to the selling prices without VAT, writing:

Debit: Accounts 111, 112, 131, ... (Total payment prices)

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Credit: Account 511 - Sale turnover (according to the selling prices without VAT).

- Other VAT accounting contents shall ply with the current accounting regime.

4. VAT accounting at Electricity companies I, II, and III

-When purchasing materials, fixed assets and/ or services for use in the electricity production and/ or trading activities, the companies' accountants shall reflect the value of materials, fixed assets and/ or services purchased accounting to the purchasing prices without VAT, writing:

Debit: Accounts 152, 153, 211, 642,... (according to the purchasing prices without VAT).

Debit: Account 133 - Deductible VAT

Credit: Account 111, 113, 331, ... (Total payment prices).

- Basing themselves on the invoices for purchase of electricity from the Corporation, the accountants shall reflect the electricity production and/ or trading costs according to the internal purchasing prices without VAT, writing:

Debit: Account 154 - Costs of unfinished production and/ or business activities (according to the purchasing prices without VAT)

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Credit: Account 336 - Internally payable amounts.

- Quarterly, Electricity companies I, II and III shall calculate and allocate deductible input VAT on electricity production and trading activities to provincial/municipal electricity offices according to Circular No. 146/1998/TT-BTC of November 12, 1998 of the Ministry of Finance.

Basing themselves on the table of deductible input VAT allocation to provincial/municipal electricity offices, the accountants shall reflect the deductible input VAT amounts allocated to such provincial/municipal electricity offices, writing:

Debit: Account 136 - Internally collectible amounts

Debit: Account 133 - Deductible VAT

- When receiving from provincial/municipal electricity offices the payment of deductible in put VAT amounts allocated thereto, the accountants shall write:

Debit: Accounts 111, 112,...

Credit: Account 136 - Internally collectible amounts.

- Quarterly, Account 133 at Electricity companies I, II and III may have Credit balance, but at the yearend, it shall only have Debit balance.

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5. VAT accounting at provincial/municipal electricity offices under Electricity companies I, II, and III.

-When purchasing materials, goods, fixed assets and/ or services for use in the production and/or business, the accountants shall reflect the value of materials, goods, assets and/or services purchased according to the purchasing prices without VAT, writing:

Debit: Accounts 152, 156, 211, 641, 642,...(according to the purchasing prices without VAT).

Debit: Account 133 - Deductible VAT

Credit: Accounts 111, 112, 331,... (Total payment prices).

- They shall reflect the deductible input VAT amounts assigned by Electricity Company I, II and III for deduction at provincial/municipal electricity offices, writing:

Debit: Account 133 - Deductible VAT

Credit: Account 336 - Internally payable amounts.

-Basing themselves on the electricity sale invoices, the accountants shall reflect the electricity sale turnover according to the purchasing prices without VAT, writing:

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Credit: Account 3331 - Payable VAT

Credit: Account 551 - Sale turnover (Purchasing prices without VAT)

- Other VAT accounting contents shall comply with the current accounting regime.

III. ORGANIZATION OF IMPLEMENTATION

1. The Vietnam Electricity Corporation shall have to guide its attached units to account VAT according to this Circular's provisions.

2. This Circular takes effect from January 1^st, 1999; other VAT accounting contents which are not guided by this Circular shall ply with the current accounting regime.

Any problems arising in the course of implementation shall be reported by the concerned units to the Ministry of Finance for study and settlement.

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